Speaking at the World Copyright Summit in Brussels this week, Victoria Espinel, the coordinator of U.S. intellectual property enforcement, said cloud music offerings like that unveiled by Apple on Monday “may have the effort of reducing piracy by giving value to consumers — the ability to own forever and access almost anywhere — that cannot be obtained with legal copies.” Espinel suggested that “the flexibility of the cloud may help spur the development of compelling legal alternatives.”

But wait, isn’t iTunes Match just “complete pirate amnesty?” After all, Apple didn’t specify any limitations on the ability of iTunes Match to scan and match ripped tracks and mirror them with 256 Kbps AAC tracks from its own iTunes library. In theory, those ripped tracks could’ve easily been ripped by someone else and shared via torrent or other less-than-legal solution. Also, the replacement tracks that Apple provides will be DRM-free, unlike those it gives current legitimate iTunes music purchasers using iCloud’s purchase history feature.

If iTunes Match does indeed process pirated music without issue, there’s no question that legitimate iTunes shoppers are the ones that end up looking dumb. Let’s say you download 50 albums from illegitimate sources, like torrent sites. With the $25.95 iTunes Match annual fee, you can download high-quality legitimate copies for about $0.50 per album. Compare that to probably around $9.99 per album when purchased legally through the iTunes Store, plus the $25 iTunes Match fee if you want that service.

Framed like that, it’s very hard to mount a convincing argument that iTunes Match doesn’t reward piracy. But it doesn’t only reward piracy. It also monetizes it.

Imagine a scenario where Apple hadn’t introduced support for content from sources beyond the App Store in iTunes Match. Would such a restriction discourage pirates? Hardly. Music piracy has been on the rise basically ever since it became possible, and shows no signs of abating. iTunes Match wasn’t likely to inspire music pirates to turn over a new leaf, no matter what.

What it does do, however, is allow record companies to recoup some of the losses associated with piracy, by effectively charging for music that was already stolen. In the example above, we saw how 50 albums works out to just $0.50 per year with iTunes Match if the music is pirated, but that’s still a massive increase when compared to the big goose egg.

Of course, iTunes Match amnesty could also actively encourage piracy, because of the obvious value proposition referred to above, and lead to an even steeper rise in the rate at which digital music is being stolen. But just like Apple may ultimately have sacrificed the Mac in order to score a victory in the larger future of cloud computing, it also might be willing to hasten the demise of traditional digital music sales (which seems inevitable anyway) in order to move to a more future-proof, subscription-based model. To use an old maxim, Apple may have cut off the limb to save the body with iTunes Match.

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• Mobile Q1: All Eyes on Tablets, T-Mobile and AT&T
• A Media Tablet Forecast, 2011 – 2015
• A Global Mobile Handset Platform Forecast, 2011 – 2015

Right now, most of the content you own is stored locally on our Macs or iOS devices. This content includes apps, books, videos, music and documents. The cutting edge techies have embraced Gmail, Google Docs and cloud services like DropBox and Box.net. The only thing keeping you from storing movies in the cloud and viewing those on your iPad is Internet speed. What if I told you the copy of Finding Nemo you bought from iTunes can be streamed instantly to any Apple device no matter where you were in the world — a café, driving down the interstate or in the London tube? It’s almost here.

Our future is wireless at speeds that meet what we have in our homes. This may be a decade away and if carriers make wireless data truly unlimited this will be a reality, but it scares me for a few very obvious reasons that simply can’t be fixed by technology.

Corporate Control of Our Data

Control by a single entity is my main fear. Cloud storage isn’t democratized and it isn’t open. Currently, when you buy something, it’s stored, owned and managed by the company you purchased it from. Apple has maintained DRM in its iTunes Store since 2003. I’ve authorized files that I bought the day Apple’s store opened and they still play on any one of my Apple devices. If I lose that song, Apple can allow me to re-download it after some back and forth with its support team. My apps, movies, music and music videos are locked to its devices. The same goes with Amazon’s Kindle platform. Buying a book from Amazon’s Kindle Store means that file is locked to its software and hardware. If it ever abandons Kindle, your books are useless. There’s no reason for either of these companies to do this, but people who bought music from stores that are now defunct are in a bit of a pickle with the content.

An example of a failed system is Microsoft’s PlaysForSure DRM. A number of music stores and MP3 players adopted this, but most of those stores and hardware companies have shifted directions or gone out of business. The hundreds you spent on music may be playable right now but no one can guarantee you’ll be able to in 10 years.

Let’s simply alter my argument a bit and change the delivery of this content from DRMed files stored on your hard drive to music stored on the cloud operated by Napster or Real’s Rhapsody Store. If those services go away, the music you “own” is no longer playable…ever. Going all in on a service that is cloud based is risky business. The same goes for content stored on Google Docs, Flickr, MobileMe and YouTube. If you’re not keeping hard copies of your content uploaded to these services, you’re a fool. Hard drives are cheap. Store your content and don’t rely on these web services that have been around for less than a few years to store your content forever. Personally, I use Backupify.com to keep secondary backups of all my data from Gmail, Google Docs, Twitter, Facebook, Flickr and WordPress. I download copies from Backupify once a month to my hard drive.

Remember when Amazon ironically pulled copies of 1984 from Kindle devices without warning? Cloud based companies can do this. They might give you a warning but no one can come into your house and take a book. Unless what you’re storing is illegal or your hard drives are compromised, the data in your home and on your computer is safe for years as long as you’re careful. Keeping a backup of your computers on an external drive at home and a duplicate at your office is good enough and I suggest anyone do that no matter how insignificant the data is. If you store photos, music and documents on your computer, back it up off-site — no exceptions.

Apple is playing it safe with its new Apple TV. Allowing us to stream rented movies and TV shows is a good way to get us comfortable with streaming content. You can still buy the same content on your iOS and Mac devices and stream those to the Apple TV but, if you’re on a TV browsing iTunes, the only option is to rent the content.

It won’t be like this forever. Soon, streaming will be offered as a more convenient and less expensive option for us. Apple and other companies will present products where you can hit play on anything you’ve ever purchased and it starts instantly as long as you have an Internet connection from your phone, tablet and computer. Invite a friend to borrow your copy of Braveheart and they can watch it as well. This convenience will not be without problems.

In Apple We Trust

Apple is on top right now. Its mobile devices are envied by every CE company, but this won’t be the reality forever. I own 300 iOS apps, 1,200 movies, 200 music videos and over 18,000 songs where over 5,000 of those songs were purchased in iTunes. I’ve invested thousands of dollars in Apple. Thanks to limited kindness of the music industry, my music is now DRM free in iTunes Plus format so it can be played on any other MP3 player, but the other content is stuck. When Apple’s devices aren’t the best and someone else takes over, I’ll be stuck to the Apple ecosystem. The same can be said for Mac software when you make the switch to Windows 7 (for whatever reason) but it’s a reality we all need to deal with.

When you want to switch to a cooler and better mobile platform, will you be okay with giving up the thousands spent on DRMed content that can’t be played on the new device? If Apple remains the dominant leader for the next 20 years, can we trust it to be kind to its loyal fans who trust when we buy a movie stored exclusively on Apple’s cloud to always be playable and never be pulled, removed or changed? Will my copy of Braveheart always work no matter where I am or will I be greeted with an error when I’m in China with, “this movie is not licensed to be played in your region.” Where the hard copy stored on my iPad would play just fine no matter where I was? We’ll see. Apple is not a movie studio so its hands are tied when it comes to content and how that content plays just as much as any other company when it comes to music and movies.

The White Album Argument

Maybe I’m not seeing the big picture. There’s another side to this where if you ask anyone over the age of 50 how many times they’ve bought The Beatles’ White Album and they won’t be able to keep count. There was record, 8-track, tape, cassette and maybe even mini-disk. They probably also bought it in CD form the first, second and third time it was remastered. You may have bought this album eight times since it was first available in record stores.

Perhaps that’s how it’s going to be when it comes to our digital music. Perhaps, you’ll buy the same content over and over again well into your old age because there would have been a few music services between 2000 and 2050. On my 70th birthday, I may lament to my grandkids that I spent thousands on music in iTunes and they’ll laugh because music is like $20 a song now and I shouldn’t be complaining that it cost 99 cents back then.

Planning for the Future

Whatever happens next, consumers are in control. We decide with our cold hard cash. We already voted that digital is the future since iTunes sales will pass the sales of physical CDs very soon, but if we go all-in on cloud content trusting in the corporations storing and delivering it, the world may shift immensely and when you take a vacation to the mountains with your family where there’s limited cell reception, the music, movies and important work documents will all be inaccessible stored in some server that’s unreachable and you’ll have to laugh because this was the future we all wanted that corporations gave us.

Maybe I’m skeptical, but the best content is physical (bookshelf) with a digital version (non-DRM) and a backup of that digital copy off-site. If your house burns down, you’ll still have the book or CD digitally but the world we’re entering into is all digital with single corporations holding the DRM keys and now they want to store the content as well. It’s unclear what’s going to happen next. Let’s hope we know what we’re doing.

Related GigaOM Pro Research: How to Manage Access to Digital Content

Specifically, it’s the news that the iPad will launch with 30,000 free e-books. That’s mostly public domain content, which you should technically be able to get on your device anyway with a little elbow grease, but it’s a great deal better being able to access the directly and wireless via the iBookstore.

The free books will be provided via Project Gutenberg, which has set about archiving digital editions of public domain books using the Internet. Any and all free titles will be DRM-free, as opposed to the DRM-enabled paid content.

 Apple’s decision to offer the books on launch day is seen as stemming from two major motivating factors. First, Apple wants to curtail any kind profiteering by third-party companies using public domain content. If you’ve glanced at the Books section of the App Store, you’ll see that quite a few developers won’t be pleased with this move, but I applaud Apple for putting the customers first.

Of course, Apple’s not acting purely out of concern for others. It’s also anxious about looking somewhat content-bare when the iPad does launch, at least regarding iBookstore content. 30,000 titles should flesh out the ranks nicely, even if some of Apple’s overtures to publishers providing paid content don’t come through on the day.

Now when it comes to apps, free ones do much better than their paid cousins. I’m curious to see if this trend continues with books. For whatever reason, I find myself shying away from public domain books on my Kindle, and I suspect the same will happen with the iPad. Any predictions regarding your own reading habits?

Related GigaOM Pro Research: Evolution of the e-Book Market

Sadly, no e-tailer turned out to be safe. Both Amazon and Wal-Mart introduced their own variable pricing schemes shortly after Apple’s went live. This was literally hours after a friend recommended switching to Amazon, since it now presented a better deal. Amazon is now offering some of its best-selling tracks at $1.29, and some at the low end for 79 cents, while the overwhelming bulk of their catalog still goes for 99 cents. True to their lowest price guarantee, Wal-Mart’s standard price point is 94 cents, with some top sellers now going for $1.24, and a few bargains at 64 cents.

The changes across the board signal an industry-wide trend, and show that Apple was not alone in negotiating a new pricing arrangement with the record labels. It’s especially noteworthy that the same tracks don’t necessarily cost the same in each store, with Apple having more songs in the top-tiered price range than either of the other two.

Both Wal-Mart and Amazon had already been selling music DRM-free, suggesting that the recording industry’s goal with dangling the DRM-free carrot in front of Apple was to pave the way for price hikes across the board. Now that that barrier is gone, expect to see digital music prices creep to the point where they more closely resemble what you’d pay at brick-and-mortar stores.

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• A 2011 Mobile Forecast
• Report: Monetizing Digital Content
• How to Manage Access to Digital Content

Way back in January, at Macworld 2009 (the last Apple Macworld, remember?), Apple announced a change in the pricing structure for iTunes songs.

The new model, which basically seems to have been a concession to music publishers in order to secure DRM-free tracks, prices individual songs at 69 cents, 99 cents, and $1.29. Currently, all iTunes tracks cost 99 cents. No specific implementation date was cited at the time, but a new report from the L.A. Times indicates that the changes will come April 7.

Not everyone in the industry is thrilled with the new pricing scheme. According to the L.A. Times article, former EMI Executive Tim Cohen is quoted as saying that, “This will be a PR nightmare. It is for the music industry what the AIG bonuses are for the insurance industry.” Charging those who don’t pirate music more, when piracy is more widespread then ever, admittedly doesn’t seem like the way to go about curbing the trend.

Details of how songs would be priced also emerged in the report. It will not be determined based on the age of releases, as some had previously suggested. Instead, price will be determined based on artist popularity. That means that Flo Rida fans will have to shell out more, while people like me who listen to music no one else has ever heard of or cares about might wind up actually benefiting from the deal.

If I was a diehard Ciara or All-American Rejects fan, I’d think about getting my download on now while the old pricing structure is still intact. Of course, if customers are sufficiently scared off by the new price scheme, the music industry might be forced to go back to the tried and true 99-cents method. Not that they’ll go quietly, mind you.

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• The Return of DRM
• Report: Monetizing Digital Content
• How to Manage Access to Digital Content

That unique control scheme recently raised even more eyebrows when it appeared as though Apple had not only forced customers to seek out specially designed headphones for use with the new device, but had also actually built-in a chip that would force third-party accessory manufacturers to pay them a licensing fee in order to be able to make headphones that would work with the new shuffle. When BoingBoing Gadgets took apart a brand new Shuffle, they found a unique chip soldered to the remote, from which a third wire was connected to the same ring on the mini-jack plug that governs the iPod’s controls.

Apple maintains that the chip is not hardware DRM, as many speculated immediately after the discovery. Instead, they claim the chip is just to ensure proper functioning of the headset-based controls, and that the specs of the device are made available to any hardware manufacturer that obtains a peripheral license from them (the one that allows manufacturers to use the iconic “Made for iPod” sticker). They acknowledge that clone chips will likely follow, and will be tolerated, although those manufacturers won’t get to officially claim that their devices are “Made for iPod.”

It may not be DRM, but it is all about control. Basically, if manufacturers care about having their device work properly, they have to go to Apple, hat in hand, and declare their intentions. This gives Apple the ability to scrutinize, and makes sure that they remain a necessary point of contact even in the aftermarket life of their products. Personally, I’m uncomfortable with any move that eschews open standards in favor of something that adds steps, extra manufacturing or unnecessary redesign, and therefore cost, to peripheral production. Apple is possibly the worst for this, and I’m actually hoping that shuffle sales give them cause to reconsider in the future.

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• Why iPad 2 Will Lead Consumers Into the Post-PC Era
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Rockstar Games, makers of the extremely popular Grand Theft Auto franchise, are picking up and moving a very lucrative music partnership from Amazon to iTunes, which offers players of GTA IV the opportunity to purchase tracks used in the game’s soundtrack.

The reason for the switch? Apple’s (a AAPL) decision to finally go DRM-free. Rockstar had apparently always wanted to go with the big fish (how could you not, when they command more than 90 percent of the digital music distribution market?), but also wanted users not to be tied down with the music they purchased using it.

The switch will come alongside Rockstar’s upcoming downloadable expansion for GTA IV, which will also introduce a major addition to the game’s existing soundtrack. This is a perfect example of why Apple’s decision to move to a DRM-free music library was the right decision, from the consumer’s standpoint, yes, but also as a sound business decision. Formerly wary prospective partners will now embrace iTunes with open arms.

For us as iTunes customers, this sets a precedent that other companies will hopefully follow, which would lead to more choice, and innovative content purchasing models. With GTA IV, you purchase the music via the in-game “Zit” service, and you can then download the track outside of the game through Amazon’s MP3 store (soon to be iTunes). Video games are an obvious partner, since the interactivity is already there, but movie and television soundtracks could soon follow. I’d also like to see the reverse implemented, whereby you can use any of the tracks from your existing iTunes library in-game.

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• The Return of DRM
• Cloud in the Forecast For Apple
• Report: Monetizing Digital Content

Many hailed the removal of digital rights management (DRM) from the vast majority of iTunes track, a move announced and acted upon last week at the Macworld trade show.

The removal applied to 90 percent of Apple’s library, and plans are to extend it to the rest in short order. Many suspect that record labels agreed to going DRM-free after iTunes agreed to be more flexible with its pricing options, moving from 99 cents per song, to between 69 cents and $1.29.

What many might not realize, however, is that this isn’t an open invitation from Apple to go totally nuts and start freely copying, sharing, and distributing music like crazy. It’s called “Social DRM” and it makes sure there’s a little bit of you in every iTunes Plus file you download via your iTunes Store account. That little bit of you isn’t your sparkling personality or winning charm, either. It’s your email address, and it’s hard coded into each and every purchase.

The purpose of including the email address is to track anyone who might get the bright idea of uploading their library to, say, a torrent site, thus stepping well into the realm of the illegal. Social DRM, in this regard, may actually be about preventing piracy, something which is not necessarily true about traditional forms of DRM, depending on who you ask.

In case you forgot, the Electronic Frontier Foundation has a nice list of examples of why Apple’s still very much in the DRM game, even if it has relaxed a bit in the music department. Among the most suspect uses: the authentication chip in newer model iPods and iPhones that third party manufacturers are required to buy a license for.

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• The Return of DRM
• Report: Monetizing Digital Content
• How to Manage Access to Digital Content

Like many users, I’m pleased that the labels are finally allowing Apple to sell music free of DRM copy protection. Given that the labels have allowed this for many other vendors (Amazon, Wal-Mart, Zune Store, etc.) I think they’ve been flirting with collusion on the iTunes store for a while anyway. 

What I’m happiest about is the higher quality — which I don’t think Apple would have needed permission for  – since Apple’s FairPlay DRM was pretty transparent anyway. Of my nearly 8,000 songs, about 200 of them are iTunes, most belonging to my daughter. The DRM has simply never been an issue since they play on every Mac and iPod device we have. I’m not even sure I’ll upgrade them, but a lot of that has to do with price, as we’ll see.

What I’m most curious about are the details and consequences of this deal as it pertains not just to Apple, but also the competion. Here are some questions I have…

Why only eight million tracks now? 

Apple has 10 million tracks on their store. Yet only eight million of them are DRM-free now. The rest are slated as being DRM-free by the end of March. It seems likely the yearly Apple contract with the labels renews on April 1, hence the significance of the date. Still, why aren’t all tracks waiting for the end of March, instead of just 20 percent of them? Could it be the labels are being generous and letting some of their wares go DRM-free early? Um, no. Sorry, but I’ve seen no generosity from the labels (or RIAA) in the digital age; I assume the answer lies elsewhere and ties into the next question…

The new prices don’t kick in until April 1. Why?

As mentioned above, if the Apple contract renews on April 1 that would explain why the new prices do not take place until then, but then why are so many tracks DRM-free now? I can’t help but wonder if the 80 percent of available DRM-free tracks today are those primarily slated at selling for $.99 or $.69, whereas the 20 percent waiting for the end of March are mostly slated for the higher price of $1.29. In other words, the labels may have no problem with you possibly buying a DRM-free track now for 30 cents more than you’ll pay in April, but they don’t want to sell many for 30 cents less. 

What about the competition?

As it is, the Amazon store sometimes undercuts iTunes by selling tracks for $.89. Will this still be allowed by the labels when the new Apple prices kick in? I mean, a dime differential is not that big a deal, but 40 cents is significant and a big disadvantage. Seems like Apple would have a case there for some kind of unfair competition. Same is true for Wal-Mart, etc. I do not know when the other stores’ latest contracts with the labels expire, but if they do not also have to honor a higher price when the contracts are renewed, something seems wrong there. Of course, these stores would get to use the lower price tier as well. 

Oh, and what’s with this AAC encoding?

Some of the comments I read yesterday about AAC encoding made me alternate between laughing and weeping for all of humanity. People, AAC is in reality MP4, and the successor to MP3. It’s better, with superior sound and smaller file sizes. Yet the Apple bashers would have you think it’ll only play on about three players. There is no self-respecting player today that does not support AAC, and it’s been supported on many devices (including Zunes and many smartphones) for years. Besides, if you feel you must have the inferior quality and larger size of an MP3 file, iTunes will gladly convert them for you.

What’s with the “Upgrade my Library” option, especially the price?

Right now, I’ve verified that most of the 200+ DRM tunes I have are now DRM-free. Yet iTunes so far has only identified 44 songs. Not exactly sure what’s taking it so long, and wonder if it’s not quite working properly. I’ll keep an eye on it and see how it grows. More importantly than the identification, I’m curious about the price. It’s straightforward right now. For a single song it’s $.30, and for an album it’s 30 percent of the current album price. But won’t that need to change in April? It sure as heck ought to. I think a lot of my tracks are going to be $.69 come April 1, do the labels really expect me to pay $.30 on top of the $.99 I’ve already shelled out for these? That would be ugly; upgrading should be minimal there. In any case I have no intention of updating any tracks until April and see if the price for upgrading changes based on the new tiered structure. 

Oh, and why can’t I just upgrade some of my music? 

I can click one button to upgrade all the tunes identified, but there’s no way to just upgrade individual songs or albums. Really? All or nothing? That’s beyond ridiculous. 

Conclusion

It’s going to be very interesting to see what happens on April 1, but also to see how the other online stores adjust their pricing — of if they do not need to. 

Meanwhile, the best thing about the DRM-free music is that the Apple bashers will have to look elsewhere (some of them have latched on to AAC) to claim being “locked” into Apple’s music “monopoly.”

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• The Return of DRM
• Report: Monetizing Digital Content
• How to Manage Access to Digital Content

Apple announced today that it’s bringing some major changes to the iTunes Music Store. Most notable among the announcements is their shift to making its entire 10M-plus song library completely DRM-free.

Prior to today, Apple’s iTunes Plus selection was fairly slim. Now, all songs from the four major labels, as well as the plethora of independent labels, will be available by default as DRM-free iTunes Plus downloads. Previously purchased songs can be upgraded via iTunes’ “Upgrade My Library” option in the Music Store at 30 cents each, music videos for 60 cents, and entire albums for 30 percent of the original price (roughly $3 if it was purchased at $9.99). According to Apple, 8M songs are available in the iTunes Plus format now, with the remaining 2M-plus tracks to be converted by the year’s end.

With this upgade, also comes an eventual update to the pricing scheme to offer the the major labels “more flexibility.” Starting in April, songs will be available for either 69 cents, 99 cents, or $1.29. There was no clear indication on what would affect the prices, but during the keynote, Phil Schiller said that “most” songs would be available at the lowest tier. Apple stated that, despite the change in per-track pricing, most albums would remain at $9.99.

Lastly, Apple announced that the iTunes Music Store for the iPhone would be freed from its Wi-Fi chains. Previoulsy, accessing the store via a cellular data connection limited you to the Podcast section, however, as of today, the entire music store will be in your hands. As before, the prices on the iPhone will be the same as they are on your computer and all tracks purchased via the iPhone will be syncable back to your main iTunes library. Looks like there may have been some justification for the apparent cellular data outages AT&T experienced this morning on the East coast.

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• Green IT Overview, Q2 2010
• The Return of DRM
• Report: Monetizing Digital Content